Erste Group releases economic outlook for 2013, more austerity, low demand, sluggish growth and high unemployment in EU

The economic performance globally and especially in Europe will remain weak in 2013, according to Austrian banking group Erste, which owns Banca Comerciala Romana (BCR). The outlook for 2013 from Erste Group's research department asks if 2013 will be lucky for the global economy. The answer, for Europe at least, appears to be no.

The report, published December 27, judges that Europe's economies have been “burdened by, and become more susceptible to, economic setbacks.” High levels of government debt are picked out as a problem and ongoing austerity measures, which the Erste report prefixes as “necessary,” will prevent booms in European economies. More moderate expected growth in the big emerging markets in India and China is also given as a negative factor for Europe. Top line growth in the corporate sector will be limited in 2013, according to Erste Group, with ongoing low demand a major factor. “We believe that enterprises will continue their defensive balance sheet strategies,” reads the Erste report. Limited expansion and release of new products are also predicted for 2013. High eurozone unemployment is attributed to countries such as Spain and Italy experiencing higher levels of unemployment than expected. This will reduce inflation in 2013 due to the lower demand and wage expectations/rises resulting from high unemployment. “Based on our expectations for unemployment, we project inflation at 1.7 percent for 2013 and 1.3 percent for 2014 [in the eurozone].” Erste Group picks out two points for Central and Eastern Europe; Croatia's EU accession in 2013 and the region's car manufacturing sector outperforming the rest of Europe. Although the timing makes Croatia's accession less economically promising than when Romania joined, Erste Group still expects significant economic growth for the country and it will be an extra Balkan region member of the common market, which should open at least some trading opportunities. Erste Group estimates that Croatia should be able to draw up to 2.5 percent of GDP in EU funds over the 2014 – 2020 period. In car production the CEE region is increasing at the expense of Southern European car manufacturers. The levels of car production in the Czech Republic and Slovakia combined are already outpacing France and Spain. Meanwhile, car production in Romania has also been on the up, bucking the European trends. Liam Lever, liam@romania-insider.com photo source: sxc.hu